Hospitals keep $3 billion in cash reserves

Tuesday

May 29, 2012 at 12:01 AMMay 29, 2012 at 11:09 AM

A health-care construction boom hasn't kept local hospital systems from adding to the $3 billion or so that they hold in cash reserves. OhioHealth has amassed the most cash: about $1.9 billion toward the end of its 2010 fiscal year. That's enough money to keep the health system, which includes Grant Medical Center and Riverside Methodist Hospital, running for about 356 days, even if its hospitals provided free care to all patients.

Ben Sutherly, The Columbus Dispatch

A health-care construction boom hasn't kept local hospital systems from adding to the $3 billion or so that they hold in cash reserves.

OhioHealth has amassed the most cash: about $1.9 billion toward the end of its 2010 fiscal year. That's enough money to keep the health system, which includes Grant Medical Center and Riverside Methodist Hospital, running for about 356 days, even if its hospitals provided free care to all patients.

Among institutions rated similarly by Fitch Ratings, the median days of cash on hand was 215.

In comparison, UC Health in Cincinnati had 146 days of cash, while the Cleveland Clinic Health System had 240 days' worth, according to Moody's, a financial-analysis business.

Nationwide Children's Hospital and Ohio State University's Wexner Medical Center have much smaller reserves. Nationwide Children's had $551 million (188 days of cash), while Wexner Medical Center had $285 million (66 days of cash).

Mount Carmel Health System declined to say how much money it holds in reserve.

Hospitals in general are saving more money, said Richard Gundling, vice president of the Healthcare Financial Management Association, based in suburban Chicago.

Gundling cited data from Moody's that shows the median-rated hospital had 175 days of cash on hand in 2011, up from 149 in 2009. Highly rated hospitals typically have more money in reserve.

Hospital and health-system officials said they need to grow their "rainy day" funds given the uncertainty surrounding the federal health-care overhaul and the prospect of lower government reimbursement for the patient care they provide.

Adequate savings also are important for health systems to keep good bond ratings, which makes borrowing money more affordable.

Deciding how much to save versus how much to reinvest in the community in any given year is "an art, not a science," said Michael Rutherford, chief financial officer of Wexner Medical Center.

But the reserves among local nonprofit hospitals suggest an imbalance in health care at a time when many employers and consumers are struggling to keep pace with rising health-care costs, said Cathy Levine, executive director of the Universal Health Care Action Network of Ohio, a consumer advocacy group that supports the federal health-care overhaul.

"Excessive reserves today in Columbus, Ohio, seem inappropriate given the sorry state of access to ongoing primary care, particularly for uninsured people suffering from chronic health conditions," Levine said.

"We're spending our health-care dollars in the wrong places," she said. "And the reserves and the continual hospital construction are, at minimum, symbolic of what's wrong with where we're spending our money in health care."

But Jeffrey Klingler, president and CEO of the Central Ohio Hospital Council, said hospitals in Franklin County treated 540,419 patients in their emergency departments in fiscal 2009, including 485,889 who were considered "low severity." Such care, however, is more expensive than preventative care.

He said local hospitals are proud of their record of caring for the uninsured and the indigent. The county's four health systems provided more than $460 million in care and services in fiscal year 2009 for which they were not reimbursed.

Klingler said no hospital in Franklin County bills patients whose families have income below 200 percent of the federal poverty level, and all significantly discount care for those whose income is as much as 400 percent of the poverty level.

The boom in local hospital building projects so far hasn't put much of a dent in those reserves.

Nationwide Children's saw a large dip in its reserves during 2008, but that was primarily due to a drop in the value of its investments, not its $786 million expansion, said Luke Brown, the hospital's vice president and controller.

About 75 percent of the decrease that year was because of stock-market losses that were more than recouped in the subsequent two years, Brown said. The remaining loss came from capital expenditures and issuing debt.

All told, Nationwide Children's had about 188 days of cash on hand at the end of 2011, according to Fitch Ratings. That's lower than the Fitch midrange of 240 days for similarly rated institutions.

Nationwide Children's spent $226 million on its master facility plan in 2011, $197 million in 2010 and $154 million in 2009. It will spend $181 million this year, which will complete its major campus projects.

From 2013 through 2016, the hospital expects to spend about $87 million annually for clinical and research needs.

For much of the past decade, meanwhile, Wexner Medical Center has sought to build up its cash reserve. The medical center nearly doubled its reserve from $157.4 million in fiscal 2007 to $284.9 million in fiscal 2011, even as it has embarked on a $1.1 billion expansion.

Through the end of fiscal 2011, Wexner Medical Center had paid out $205 million of the total $1.1 billion cost, OSU officials said.

Rutherford said the medical center has an "interim" goal to have 100 days of cash on hand.

bsutherly@dispatch.com

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